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Paul Jenkins: Initiative to repeal revamped oil tax wrongheaded

Paul Jenkins

In the coming days, you will run into earnest, misguided people at shopping centers or grocery stores who will beg you to sign a petition putting on next year's primary ballot a measure that would scrap the Legislature's revamp of Alaska's oil tax law -- even before the ink dries.

The reform -- stalled for years by a Democrat-driven Senate coalition -- cuts the state's rapacious tax on the North Slope oil industry to spur lagging investment and production. More oil, after all, means more state revenues.

Opponents laughably mischaracterize the reform, Senate Bill 21, as an unconstitutional "giveaway" promising nothing in return. They are being intentionally obtuse. They want oil taxes high to pay for even more unaffordable government. The problem? Their model is unsustainable. More tax equals less oil equals less revenue. Simple. It already is happening.

With half its economy and a third of its jobs oil-dependent, Alaska is locked in do-or-die competition with oil provinces around the globe for industry investment. As production climbs elsewhere, it is fading here. Alaska now is third in U.S. production - trailing Texas and North Dakota and barely leading California. Investment driven off by Alaska's Clear and Equitable Share oil tax is going elsewhere.

Because of that tax, former Gov. Sarah Palin's brainchild, large North Slope companies are not investing in new oil. What spending there is pays for maintenance and infrastructure. Most of that has been underwritten by generous cash tax incentives in ACES. Production is down. Trans-Alaska oil pipeline throughput -- where Alaska gets 90 cents of every dollar it spends -- is slipping by 6 percent a year. The line itself may be jeopardized because of waning throughput.

Alaska next year will take in hundreds of millions of dollars less in revenues because of production declines, and already is dipping into its cash reserves. If oil prices plunge, it will be worse.

In addition to all that, we see headlines, such as one in this newspaper last week, that confirm Alaska no longer is the belle of the ball. "USGS: 7.4B barrels of oil possible in ND, Mont." The Associated Press story said the oil was in two massive shale formations - "nearly double the amount previously estimated for the region."

Yet, incredibly, inexplicably, die-hard North Slope oil industry critics and the tiresomely predictable Left believe the best thing to do in this highly competitive, volatile environment where revenues already are drying up is to embrace again the very tax structure that has us hurtling toward the bottom of the barrel. Go figure. And they want more than 30,000 Alaskans to abandon all reason and common sense, ignore the clear economic storm warnings and sign petitions to cut off their noses to spite their faces.

It is hard to believe anything could hurt Alaska more. The populist petition drive, which likely already is stalling new investment, is feeding on greed and unchecked hatred -- and money from who knows where. It is a political end run; a dodge to avoid the grindingly slow fuss and muss of legislative checks and balances and a way for special interests to lose the argument and still game the system without having to prove up.

Somebody should demand initiative backers explain how Alaska will remain afloat in the long run if they succeed. How would they spur North Slope production? What would they do when Alaska's cash reserves run out? Or the pipeline runs dry? Or oil prices drop? How would they generate jobs for Alaskans when production and price graph lines run off the bottom of the page? How will they fund government they so love? Or underwrite half the economy? Why would they not let the new tax work and see whether production increases? It always can be changed.

In a state boasting its share of leftists, Palinbots and government-lovin', anti-oil industry crazies, the question may get on the ballot. None of us should ignore that. Tim Bradner, on KAKM's "Anchorage Edition," correctly characterized the petition as a "wild card" in next year's elections. It is that and more. It could have political consequences in the primary and general elections -- and fiscal effects far into the future. It could put Democrat Mark Begich in a tough spot with the Left.

A successful initiative vote would return Alaska to the short-sighted, spend-now fiscal train wreck of the past.

Absolutely nothing could be worse for Alaska's future.

 

Paul Jenkins is editor of the AnchorageDailyPlanet.com.


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